Image of SOX and Dodd-Frank Do Not Preempt a Wrongful Discharge Claim in WA

SOX and Dodd-Frank Do Not Preempt a Wrongful Discharge Claim in WA


The Washington Supreme Court held in Becker v. Community Health Systems that the whistleblower provisions of the Sarbanes-Oxley Act and Dodd-Frank Act do not preempt a common law claim of wrongful discharge in violation of public policy.

Becker’s Whistleblowing About Misleading EBIDTA Projection

Becker worked for Rockwood Clinic PS as its CFO. He was required by state and federal law to ensure that Rockwood’s reports did not mislead the public, which also required his personal verification that the reports did not contain any inaccurate material facts or material omissions. Becker’s EBIDTA report projected a $12 million operating loss for Rockwood the upcoming year. When Community Health Systems (CHS) acquired Rockwood, it represented to creditors that the Rockwood acquisition would incur only a $4 million operating loss. To cover the discrepancy, CHS’ financial supervisors allegedly directed Becker to correct his EBIDTA to reflect the targeted $4 million loss. Becker refused, fearing that the projection would mislead creditors and investors in violation of SOX.

Rockwood’s CEO placed Becker on a performance improvement plan and directed him to edit the EBIDTA projected loss to reflect the $4 million valuation.  Becker elevated his concerns to management and warned that he felt compelled to resign if the company refused to address his concerns. The company accepted his resignation and Becker brought a SOX claim.

SOX and Dodd-Drank Do Not Preclude State Remedies

Becker subsequently brought a wrongful discharge claim in state court and CHS moved to dismiss the claim on the basis that SOX provides an alternative means to protect the public policy of honesty in corporate financial reporting. The trial court denied the motion, and on appeal, the Washington Supreme Court held that an alternative remedy preempts a wrongful discharge claim only when the alternative remedy provides an exclusive remedy.  The Becker court then found that SOX and Dodd-Frank do not preclude remedies under state law:

“Congress expressly declared that the remedies available under SOX and Dodd-Frank supplement rather than preclude state or federal remedies. See 18 U.S.C. § 1514A(d); 15 U.S.C. § 78u-6(h)(3). We respect Congress’ choice to avail these administrative remedies in addition to our existing common law, and we decline to contravene that intent by barring Becker from full adjudication of his claim.”

Implications for Corporate Whistleblowers

In states holding that SOX and Dodd-Frank are not an exclusive remedy for whistleblowers that have suffered retaliation for disclosing accounting fraud or shareholder fraud, SOX complainants should consider removing their SOX claim to district court and adding a claim of wrongful discharge. While SOX authorizes uncapped compensatory damages, a wrongful discharge claim offers the opportunity to obtain punitive damages.

Guide for Corporate Whistleblowers 

The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries.  Recently, a former in-house counsel at a biotechnology company recovered $11 million in a SOX whistleblower retaliation case alleging that the company fired him for disclosing violations of the Foreign Corrupt Practices Act.

On the fifteenth anniversary of SOX, leading whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: “Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.”  The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.

The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery.

SOX whistleblower protection

Sarbanes-Oxley Whistleblower Retaliation Attorneys

The whistleblower lawyers at Zuckerman Law have substantial experience litigating Sarbanes Oxley whistleblower retaliation claims.  To learn more about corporate whistleblower protections, see our Sarbanes-Oxley Whistleblower Protection FAQ.

Click here to read client testimonials about the firm’s work in SOX whistleblower and other employment-related litigation.  To schedule a free preliminary consultation, click here or call us at 202-262-8959.


legal protection for corporate whisteblowers

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.